European Markets Tumble Amid Middle East Conflict, Oil Prices Surge

European shares plummeted to near four-month lows on Tuesday, sparked by tensions from the ongoing conflict in the Middle East, which drove up oil prices and dampened risk appetite among investors.

The pan-European STOXX 600 index fell by 0.3% to 575.24 points by 0930 GMT. Just the day before, it had fallen to 559.05 points, its lowest since November 2025, before closing slightly higher at 576.78 points. This fluctuation followed U.S. President Donald Trump’s remarks suggesting positive talks aimed at ending the Iran conflict—a narrative quickly rebutted by Tehran as psychological manipulation.

The situation caused a rebound in oil prices, which exceeded $100 a barrel. Meanwhile, European financial and defense stocks slid by 1.4% and 1.8% respectively, further impacting the benchmark index. Though energy stocks saw a modest increase, the travel and leisure sectors, highly sensitive to oil price changes, decreased by 0.8%. David Morrison of Trade Nation noted that markets had yet to fully account for a closure of the Strait of Hormuz, a crucial channel for one-fifth of global oil trade.

As markets face the threat of energy-driven inflation and anticipate upcoming rate hikes from the European Central Bank due to the conflict, evidence of economic impact was reflected in slowed eurozone private sector growth. Additionally, substantial market movements included Puig’s 13.6% rise following talks of a merger with Estee Lauder, and Bellway’s 8.2% drop after revising its fiscal outlook. As German agriculture and health firm Bayer AG fell 3.5%, Germany’s DAX also took a hit, decreasing by 0.8% led by SAP’s 3.7% decline after a downgrade by J.P. Morgan.